The eye of the hurricane

Equity markets settle down

A sense of calm has returned to Asia this morning, thanks to the news headline tickers staying quiet about anything Ukraine, energy or otherwise commodity-related. Overnight, US markets played catchup to yesterday morning’s carnage in Asia, but although Wall Street had an ugly day, they didn’t add anything new to the story.

That state of affairs is unlikely to last though and one senses we are in the eye of the hurricane, a period of calm before the winds return once again. Price action in the nickel market overnight, suggests a sense of panic and the squeeze on commodity supplies is going nowhere soon. I qualify the word “calm,” though. Brent crude is 2.40% higher in Asian trading today, but when set in context versus yesterday’s volatility, that it practically comatose.

Assisting the sense of calm is a very quiet data calendar in Asia today. In Australia, NAB Business Confidence for February rose sharply to 14 from 4 previously, showing no geopolitical nerves. The Lucky Country, of course, is better placed than most in the current climate, being a major exporter of just about every commodity that the world desperately wants. Japan’s average earnings rose by 0.90% in January YoY, higher than expected. The number is flattered by a new basing year and annual salary increments.

Looking ahead, Eurozone Employment is unlikely to move the needle, European markets being completely at the mercy of geopolitical developments. China Inflation tomorrow will remain benign while US Jolts Job Openings, and US Inflation on Thursday, will reinforce a Fed hike next week. The real focus will be on how many Fed hikes we will get this year and whether the Ukraine situation and its knock-on effects will cause the Fed to blink on hikes. Ukraine derived volatility aside, markets are looking like they are now moving into a holding pattern ahead of next week’s FOMC meeting from a data perspective.

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